How Steve Jobs Became a Billionaire

It wasn't Apple that made him his first billion, as a book by Pixar ex-CFO Lawrence Levy explains.

Steve Jobs’ name is forever tied to Apple: the company he founded, was fired from, and later returned to and made the most valuable in the world. It’s easy to forget that it was another company—Pixar—that made him his first billion. Central to that story is Lawrence Levy, the man who Jobs reached out to, unknown, in November of 1994 and hired as CFO. His mission? To take the scrappy company public.

I arrived at Pixar in February 1995. Steve didn’t give me any specific instruction for what to do first. Ed Catmull, cofounder of Pixar, greeted me and, over the first couple of days, walked me around the company, introducing me to the key players and describing my role.

Everyone was friendly, welcoming, and greeted me with polite gestures like: “Glad you’re here, let me know if I can help.” Something was missing though. For as much as people were friendly and polite, I also felt they were a bit distant and aloof. There didn’t seem to be a lot of excitement that Pixar had a new Chief Financial Officer. I had the deep sense that Pixar’s guard was up, and I didn’t know why.

It didn’t take me long to find out. It started with Pam Kerwin, a Pixar Vice-President who was general manager of various business operations within Pixar. She was a little older than me, in her early-forties, with striking red hair and a sweet demeanor that quickly made others feel at ease around her. Her office was just down the hallway from mine, and she was one of the few people who invited me to say hello and give me the lay of the land.

“I don’t envy you,” Pam jumped in after some pleasantries, “I don’t think you really get what you’re up against.”

“Up against?” I asked.

“You’re Steve’s guy.”

I must have given Pam a terribly puzzled look, because I wasn’t sure what she meant.

“Pixar and Steve have a long history,” she went on. “Not a good one. You don’t know it yet but Pixar lives in fear of Steve.”

Jobs laughs with Chief Creative Officer John Lasseter in the latter’s office at Pixar in August 1997.Photo: Diana Walker—SJ/Countour by Getty Images

“How so?”

“Steve doesn’t get Pixar,” Pam went on. “We’re artsy and creative. We’re like a family. We hug. And we’re not a top-down organization; everyone here has a voice.”

The strength of Pam’s emotions about Steve caught my attention.

“Steve is the guy who owns us—but he’s never been one of us,” Pam explained. “We’ve long felt unvalued, unappreciated. People worry that if he gets too close, he’ll ruin Pixar, and destroy our culture. And now, you’re the guy he has sent to whip us into shape.”

That much was true. My mission was to transform Pixar into a thriving enterprise. I was supposed to be an agent of change.

“Plus,” Pam added, “He’s broken promises. And people are angry about that.”

“What promises?” I asked.

“Stock options,” she said. “He promised them to us, and they’ve never materialized. Perhaps part of your job is to fix that, but every day that passes without a solution, people grow more cynical. Many here have been waiting for years to own a little piece of Pixar. All their friends at other companies have been rewarded, and now they’re frustrated. They feel used.”

This was a lot to take in. It certainly explained why my arrival hadn’t been accompanied with much fanfare.

Pam’s admonition was, if anything, understated. In my first days at Pixar I encountered animosity directed toward Steve throughout the company, especially from those who had been there since the early days. One person said to me point blank, “Keep that man away from us.”

It was an unwelcome surprise, to say the least. I began to fear that my concerns about Steve were coming true. I had accepted the job at Pixar with a considerable amount of skepticism. Although Steve and I were getting along great so far, his mercurial reputation had made most people I knew caution me against working with him. Even more problematic was the company itself. Pixar had been in business for ten years and had made almost no impact, and even worse, not even Steve could clearly articulate what he wanted the company to be—only that he didn’t want to keep underwriting the millions of dollars it lost each year.

These were the risks I had known. Now it seemed I had the extra burden of being “Steve’s guy,” suspected of possessing some sort of hidden agenda. That wasn’t true. But that didn’t matter. I was going to be more alone than I expected. After the initial shock wore off a bit, my instinct was to figure out how to try and use this to my advantage. If people were going to leave me alone, I’d have a window of opportunity during which no one would expect much of me. That gave me a chance to quietly explore planet Pixar.

Steve, however, didn’t want me to waste time. He had invested close to $50 million in the company and was still covering Pixar’s monthly cash shortfall and he could not put an end to that soon enough.

“I’m focused on fixing that as soon as I can,” I told him, “but I need some time to figure it out.” Somewhat impatiently, Steve went along with my plan.

Pixar’s employees, especially those who had been there the longest, felt trapped. They felt let down and misled by Steve for not giving them a right to share in Pixar’s success. But they had little choice other than to wait and see what happened because they had invested so much time in the company. It would make little sense to leave now, especially when Toy Story’s release was imminent.

Making matters worse, promises had been made by Steve to a handful of Pixar’s senior team, giving them a share of Pixar’s film profits that might be converted into stock options. I was the most recent of those, having received a promise of stock options when I joined the company. Besides the top executives, everyone else was excluded. This was a disaster in the making. All it would take was one domino to fall, and an exodus of Pixar’s talent could happen overnight—if not now, later. That would spell the end of Pixar’s capacity to innovate.

The Pixar crew working on ‘Toy Story’ with Lasseter, kneeling, in 1995.Photo: Mary Evans/Ronald Grant/Everett Collection

On this issue I was caught squarely in the middle. On the one side, Pixar’s long-time employees were angry and bitter. There were constant gripes as I made my rounds at Pixar:

“Will Steve take care of us?”

“We’ve waited a long time for this.”

“I’ll believe it when I see it.”

On the other side was Steve, who had all the power to decide how many stock options to give Pixar’s employees. Because Steve owned 100% of Pixar, every option that went into the stock option plan would reduce his personal stake in the company as those options were exercised by Pixar’s employees.

Steve wanted to reduce his share as little as possible. He had in mind the kind of percentage that a new start-up might use, as low as 15% or 20%. That might work for a company just starting out, one that might expect to hire 50 or so employees in its first couple of years. But Pixar already had close to 150 employees and many of those were seasoned veterans who, by Silicon Valley standards, were entitled to significant stock option amounts.

He was also adamant about taking no risk that he would lose control of the company in the future. I didn’t need to ask him why. He wanted to avoid any risk of being in a position like he had been in at Apple (AAPL) where the Board had effectively ousted him from the company against his will.

Sketch from ‘Toy Story’ shown at a ’20th Anniversary of Disney Pixar Animation’ exhibition, at The Science Museum in London in 2006.Photo: Jonathan Hordle/REX/Shutterstock

Photo: Jonathan Hordle/REX/Shutterstock

The more I waded into this issue, the more I felt like a punching bag for everyone: Pixar’s employees thought I was protecting Steve. Steve thought I was asking for too much for Pixar’s employees. It didn’t matter that, inwardly, I sided with Pixar’s employees. My job was not to take sides but to broker a solution that would work for Steve and the rest of the company. It was the first timea I felt myself pitted against Steve. He began to get irritated whenever I brought up the subject.

“We’ve already discussed it,” he would say. “Just show me the proposed plan.” But I couldn’t make an options plan without enough stock to put in it.

“When Steve digs in his heels it’s very hard to move him,” I complained to my wife Hillary one night. “Most of the time we’re on the same page, but we’re not on this one and there’s little I can do.”

And so, on my long commute between the Berkeley Hills and the San Francisco Bay, I worried. I worried about how seriously we would be taken as an entertainment company. I worried about Disney (DIS) claiming the space that Pixar was creating. I worried about the pressures a new strategic agenda would put on Pixar’s culture.

A group of Pixarians shot for a 1995 Fortune feature, “Steve Jobs’ Amazing Movie Adventure.” Levy, his leg in a black cast, is in the second row, behind Jobs and Lasseter.Photo: Louie Psihoyos

But it was the stock options that bothered me the most. As mundane an issue as it might seem, I believed that Pixar’s fate hung partially in the balance of how much stock we put in the stock option pool. Too little, and Pixar’s key employees might be forever disgruntled, ruining the culture on which Pixar’s was built. I wasn’t sure I had anything further I could squeeze out of Steve but I needed to take one more final swing at it, even if it meant incurring Steve’s legendary wrath. I picked up the phone one night and called him.

“We have to add more stock options,” I said flatly. “We can’t make it on the amount we have allocated right now. It’s not enough. A few percent more, and we can give it a shot, and still have a good chance you’ll maintain control of the company even after we go public.”

“I said I didn’t want to revisit this.” Steve griped. He was on the verge of dismissing it. I suggested a number. It was as far as I thought he might go.

“Will this be it?” Steve asked, totally exasperated. “Will this be enough options to last for a long while?”

I didn’t think it would be. It would barely get us by now.

“Yes,” I declared with unfounded confidence. “We’ll make it work.”

“Then I don’t want to hear about it again.” And with that, Steve ended the conversation.

I breathed a deep sigh of relief. I at last had my first real toe hold. The option plan was pivotal to moving Pixar forward. But now the stakes were higher than ever. Those stock options needed to be worth a lot one day. A small win wouldn’t cut it for anyone. Pixar was aiming for the big time.

Steve once told me that the gestation of great products takes much longer than it appears. What seems to emerge from nowhere belies a long process of development, trials, and missteps. If anything proved that case, it was Pixar. The gestation of Toy Story could be traced back 16 years to when Pixar had been the computer graphics division at Lucas Film. It had been a long and arduous path since then, with no end of challenges. This made it especially ironic that, in one week in November of 1995, Pixar’s entire future would depend on just two numbers: the opening weekend box office for Toy Story, and the price at which Pixar’s shares sold in its IPO.

The first number, the opening weekend box office for Toy Story, would tell us how well Toy Story would perform overall. Scheduled for release on November 22, 1995, the Wednesday before Thanksgiving, Disney told us it could make a good prediction of the opening weekend box office, and indeed the film’s overall performance, solely on the basis of that week’s Friday night box office.

This meant that, after all those years of evolving the technology and then four more years of actually making Toy Story, Pixar would learn on a single Friday night in November what the world thought of its work. It reminded me of the 100-meter sprint in the Olympic games. A lifetime of training to become the fastest runner in the world came down to a single ten-second performance. If the world fell in love with Toy Story, Pixar would have a chance to usher in a new era of animated entertainment. If it didn’t, Pixar might be written off as another company that tried but never quite hit the mark.

“What opening weekend box office would make you feel really good?” Steve asked me as we were taking a walk in Palo Alto one Saturday afternoon.

“Anything above ten million,” I said, “Even If we hit eight million we’re on the board.”

“My number’s fifteen,” Steve said. “If we hit fifteen to twenty, they’ll project a total domestic box office of over a hundred million. Then no one will question Pixar’s arrival.”

This was the umpteenth time we’d had this same discussion. We loved to speculate about Toy Story’s box office potential and what it meant. A domestic box office run—meaning the total North American ticket sales for Toy Story—of a hundred million would be sweet indeed. It was a magic number in the film business, and very difficult to achieve, even more so in animation. In all of film history, only four animated feature films had a domestic box office greater than a hundred million, and all of those had been made by Disney: Beauty and the Beast, Aladdin, The Lion King, and Pocahontas. If you excluded the four Disney blockbusters, of the 17 other animated feature films released by major studios or well known independents over the past five years, the average domestic box office was a little under $14 million. That’s total domestic box office, not the opening weekend. In animation, for all practical purposes, Disney had been the only game in town for over fifty years.

The second number that would define Pixar’s future was the price Pixar’s stock would first start trading at as a public company. Of all the issues in Pixar’s public offering, there was none that occupied Steve’s thinking more than what Pixar’s stock would sell for when it first went public.

Given the total number of shares of Pixar stock that existed, if Pixar’s stock traded at $10 per share, Pixar would be worth about $370 million, and Steve’s eighty percent share around $300 million. If it traded at $20 per share, Pixar would be worth $740 million and Steve’s portion around $600 million. In other words, Pixar’s stock price at the end of its first day of trading would not just signify Steve’s comeback, it would truly quantify it.

“We’re worth more than Netscape,” Steve asserted one evening when we were talking over the phone. “They’ve only been around about a year, and are losing money. If Pixar’s films are hits, we’ll make more than them. We should be worth more.”

Netscape had been valued at a little over $1 billion when its stock begun to trade on August 9. By the end of that day, it was worth over $2 billion. In my mind, no amount of number crunching could get Pixar to a value of $2 billion.

“It’s a huge risk,” I tried to push back. “If we model our IPO on Netscape, the biggest IPO frenzy in years, we might blow the whole thing. We’re better off getting out the gate, keeping investors happy, and letting the stock build momentum.”

Eventually our investment bankers came up with their own verdict. They thought Pixar’s stock might quickly level out in the high teens, giving Pixar a value of around $700 million. They wanted the initial price to be $12 – $14 per share, meaning the proposed price would value Pixar around $500 million, an enormously respectable number. But Steve needed to be on board.

“If we start at $12 – $14 when we file with the SEC,” I told him, “and if the road show goes well we could double it, just like Netscape did. If we double it, Pixar will be valued at a billion dollars. We’ll have a shot, but we take much less risk starting conservatively and letting the market be the judge. All the bankers are on board. Me too.”

“Let me think about it,” Steve said.

A couple of hours later he called me.

“We’ll go with it,” he said. “I think we’ll have so much interest after our road show that we’ll double the opening price.”

I breathed a huge sigh of relief. We had our starting place.

On the morning of Saturday, November 26, all I could do was pace. We had arranged a chain of phone calls through which we would know how well Toy Story had performed Friday night. I would receive a phone call from Sarah Staff, who was plugged into Pixar’s source of box office information.

“When will you hear?” Hillary asked.

“They said by around 10 a.m.,” I replied.

It was now approaching 10:30. It would only be moments before we knew the first magic number, that of Toy Story’s opening weekend box office. I’d take $10 million I reminded myself, but something north of $15 million would be very sweet indeed.

“It’s massive,” I said. “Massive. They didn’t believe it was possible. Disney predicts a weekend box office close to $30 million! Friday night’s box office alone was close to eleven and a half million.”

“Wow!” Hillary exclaimed. We high fived.

“$30 million!” I continued. “Even more, audience polling is off the charts. Disney thinks the film will have a huge run. It will sail past $100 million, and probably past 150.”

Five minutes later the phone rang again. It was Steve.

“It’s amazing,” Steve started excitedly. “I’ve talked to Disney marketing, I’ve talked to John. I’ve talked to Eisner. This is huge. They’re thinking this could be the biggest film of the year.”

The biggest film of the year had been Batman Forever, with a total domestic box office of $184 million. Second was Apollo 13, with $172 million. It had never really occurred to any of us that we might reach into that territory.

“Are you serious?” I said. That means it’ll get close to $200 million.”

Epilogue: On Nov. 29, 1995, Pixar shares were offered to the public at $22 a share. By close of market, shares were trading at $39, valuing the new company at $1.5 billion. Toy Story, made for around $30 million and released a week earlier, went on to gross $365 million in global box office sales.

To Pixar and Beyond

A version of this article appears in the November 1, 2016 issue of Fortune.